In the letter he reveals that he's been talking to Apple about
doing more to unlock the $137 billion that it holds on its
balance sheet. And he believes that by using preferred stock,
Apple could get a lot more credit for the cash it holds.

This is a frustration of a lot of investors. Apple has all
this cash: Why isn't the market valuing it more?

Anyway, here's how Einhorn says Apple could create hundreds of
billions worth of value in a snap:

For example, Apple could initially distribute to existing
shareholders $50 billion of perpetual preferred stock, with a 4%
annual cash dividend paid quarterly at preferential tax rates.
Once a trading market is established and the market recognizes
the attractiveness of a highly liquid, steady yielding instrument
from an issuer backed by Apple’s unmatched balance sheet and
valuable franchise, the Board could evaluate unlocking additional
value by distributing additional perpetual preferred stock to
existing shareholders. With this conservative
action, Greenlight believes the Board could unlock hundreds of
billions of dollars of latent shareholder value.

Assuming Apple retains its price to earnings multiple of
10x and the preferred stock yields 4%, our calculations show that
every $50 billion of perpetual preferred stock that Apple
distributes would unlock about $30 billion, or $32 per share in
value. Greenlight believes that Apple has the capacity to
ultimately distribute several hundred billion dollars of
preferred, which would unlock hundreds of dollars of value per
share. Further, Greenlight believes additional
value may be realized when Apple’s price to earnings multiple
expands, as the market appreciates a more shareholder friendly
capital allocation policy.

Einhorn is on CNBC talking about this, and he says that this
solution would allow Apple to keep its cash hoard for whatever it
wants, while also creating an instrument that monetizes it,
creating instant value for shareholders. He describes it as a
win-win.

Hosts on the show asked him why this couldn't be accomplished
just with a big share buyback or higher dividend. Einhorn's
suggestion was that that would require Apple to part with more
cash instantly than it was comfortable with. He claims that the
creation of a special class of shares would create instant value,
while also allowing Apple to hold onto most of its cash.

Specifically, he said on CNBC when asked why not do buybacks:

This is better. This is way better because this doesn't actually
require them to use any of the cash right away. They
would be able to maintain their cash chest and all of the
strategic ideas and at the same time shareholders would be
rewarded with something that gives them credit for Apple's
phenomenal balance sheet and franchise value.

Bear in mind, this idea only works if you believe that current
equity investors aren't properly valuing the cash. If you think
current equity does properly take the cash into account, then
just moving this cash towards preferred stock doesn't do
anything. You can't create money out of nothing.

On CNBC he says that he's more long Apple than he ever has been
before.

More broadly, it's remarkable that Apple, which was once an
invincible high-flyer, is now being targeted by angry hedge
funders.